Expense a Is a Fixed Cost; Expense B Is a Variable

question 6

Multiple Choice

Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but is still within the relevant range. In terms of cost per unit of activity, we would expect that:

• A) expense A has remained unchanged.
• B) expense B has decreased.
• C) expense A has decreased.
• D) expense B has increased.

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Definitions:

Total Revenue

The aggregate income a company generates from its sales of products or delivery of services over a designated period.

Price Falls

A decrease in the market price of a good or service, which can affect consumer demand, producer supply, and overall market equilibrium.

Price Elasticity

A measure of how much the quantity demanded or supplied of a good changes in response to a change in its price.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given time period.